Friday, July 24, 2009

Investing in Domains? If You Get Lucky...

GET RICH QUICK? HARDLY. UNLESS...

Domain Investing:

The Next “Real Estate” Boom?

A website domain is very much like a piece of property. It is owned by someone. It can be bought and sold, traded or transferred. And just as we’ve all witnessed a nice run up in housing prices over the past few years, good domain names appreciate and can (maybe)fetch enough to put your kid through college – if you know what you’re doing and how to maximize your ROI.

Get Reach Quick? Hardly.

If you Google “domain investing” you’ll see that every Tom, Dick and Louise has written the definitive text on how to make billions trading domain names. Oh, yea? Well, if these guys know how to make money trading domain names, why in the world would they tell you – at any price!

Skip the “get rich quick” approach for a couple of reasons. First, every really great domain name has already been thought of and registered. Okay, maybe there are one or two yet to be created but the chances of you coming up with the next big thing are like zero. It’s just not going to happen.

However, there are ways to make money in domain investing. Let’s look at a couple of investment opportunities designed for aggressive investors. Please, don’t bet the farm on a domain name.

Know the Market

Would you buy a stock without doing some background research? What if you didn’t understand how the stock market functions? It’s tough enough to make money in domain investing without adding market ignorance to the mix. Tag several domain trading websites and track them until you get a feel for what sells for what. Really good names can bring some nice money your way. One example: a domain that was purchased in 2000 for $10,000 recently sold for $65,000. That’s a very nice ROI in any investment arena. Of course, it’s the exception to the rule, which is why it got so much media play.

It can happen, but it might take some time. You’re more likely to make $50 on a domain name trade but it’s fun and it is fifty bucks. Just keep it in perspective and only invest what you can afford to lose.

Buying and Appraising the Quality of Domain Names

There are plenty of sites where domain investors buy and sell names with legs, that is, domains that already have a business attached to them. These are attractive to entrepreneurial types interested in building web-based businesses.

Or, sometimes, you’ll find a great domain name, perfect for your on-line venture, for sale on these domain investing and trading websites. No business attached. You’re just buying the name.com. You may have to bid your way to ownership, or make an outright purchase if it really is the perfect domain name.

Either way, you can hire a domain name appraiser – yes, they really exist – who will run all kinds of diagnostics on the name to see how it would do if you bought it. Or, if you aren’t interested in the name for your own use, you can simply take your chances, register one or a bunch of domains for very little and post (it) them for sale or lease.

Building Cyber Equity

Another way to make some cash through domain investing is to register a “good” domain name and then actually generate some revenue through actual sales, Adwords or some other steady income from the website. You are, in fact, building cyber equity, adding value to the domain name by also delivering a functioning website and even some web traffic.

Think of it this way. There are people who make a lot of money “flipping” real estate. They buy a house that needs fixing up, they fix it up and resell at a profit. Or, so the flipper hopes.

Same deal here. You register the domain name, which shouldn’t cost more than a few bucks, you spend a few Sundays getting hooked up with a PPC or affiliate program (or why not 10 PPC and affiliate programs) and you’ve got cash flow that immediately increases the value of the domain name.

A higher page rank will also increase the value of a domain name, so some SEO work may pay off big time when the sale is finally made. If you buy a domain name and simply park it on some host’s server, you aren’t taking full advantage of your investment, even if it’s only a $2.95 domain registration fee. Put the domain to work for you and chances are, you’ll increase its value at the time of sale. And make some extra bucks while waiting for sale day.

Buy Domain Names in Bulk

Once again, take a little time to learn about domain name registrations. There are plenty of sites that’ll give you a significant break on registration when you register in bulk. Some players in this market register 1000s of domain names at a time for maybe a buck or two per registration. Then, they market their inventory. Very risky and not for the faint of heart.

Know What You Need to Know

So, if you don’t know much about domain name investing, take the time to learn – to learn how to construct a simple website, to generate income from sources other than direct sales, although if you do have access to a useful product or service, why not use the site for direct sales as well. It only increases the value of your domain name when you can show you’re making $50 bucks a week as an affiliate site for the XYZ company and $100 a week selling products.

Is Cyber Realty In Your Future?

It is if your expectations are reasonable, you don’t invest more than you can afford to lose and, most importantly, you learn the rules of the game – everything from how the market operates to how to build equity in a domain name.

If you think of a domain as a “place” just like a home, the market dynamics are similar. The difference? People need a home. They don’t need to spend $5,000 on your really cool domain name. In other words, domain investing isn’t a needs-driven marketplace.

Remember Beanie Babies?

Basic economics 101: a market is only strong as long as its investors believe in the market’s ability to make a profit. Just a few years back, people were buying up Beanie Babies for investment, spending hundreds and even thousands of dollars for a stuffed toy! Visit eBay today to see what Beanie Babies are selling for. The market in plush collectables lost faith in its ability to generate a profit and the bottom fell out. Overnight!

Anything, including a domain name, is only worth what someone is willing to pay for it. And in the case of domain names, supply far outstrips demand so you better have a good product. Preferably one that’s earning some income.

And if you get an attractive offer, take it. It’s pretty unlikely that you’ll find another buyer willing to pay bigger bucks for that domain.

It is a market – domain names – but it’s a fickle market, it isn’t needs-driven and there’s always more supply than demand. Still, by taking a few simple steps, you can add value to a domain name and actually make a few hundred bucks.

No, it won’t get your kid through college, but it might pay the air fare to get her there.